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Kiwi starts direct trading with renminbi from today

Direct trading in the Chinese and New Zealand currencies starts today after a joint announcement in Beijing by Premier Li Keqiang and Prime Minister John Key as he began an official visit.

The long-awaited move means the kiwi joins the Australian and US dollars and the Japanese yen as the four market-making currencies that can be converted directly into renminbi (RMB) or yuan.

The People’s Bank of China (PBOC) says a reference rate for the currencies will be announced daily at 9:15am in Shanghai, with yuan moves limited to 3% on either side of the fixing.

The UK and Singapore announced deals with China in October to start direct trading between their currencies and the yuan, which has overtaken the euro to become the second-most widely used currency in global trade finance. South Korea is also seeking convertibility as the Chinese currency.

Mr Key says direct convertibility will make doing business with China easier and will stimulate trade and investment. 
“Direct trading will also increase the integration between the New Zealand and Chinese financial systems, and deepen the economic relationship between the two countries," he says.  "China is now New Zealand’s top destination for exports of goods.”

Bankers say the main advantage for businesses and travellers will be a drop in transaction costs because it will mean only one currency pair rather than two. Two-way trade between New Zealand and China is now worth more than $18 billion.

Approval has been granted to ANZ, HSBC and Westpac to act as market makers for the currency pair.

On Monday, China doubled the yuan’s trading band against the US dollar to 2% on either side of a daily reference rate set by the central bank, a step toward giving market forces a greater role in determining its exchange rate.

The PBOC also keeps its currency within 3% of fixings against the euro, the UK pound, the yen and the Hong Kong dollar, while a 5% limit applies to the Malaysian ringgit and the Russian ruble.

“Direct convertibility marks another milestone in the internationalisation of the renminbi,” HSBC says. “Coupled with China’s recent move to widen the daily trading band of the renminbi, it further demonstrates the country’s determination to speed up its financial market reform.”

HSBC says it has renminbi trade capabilities in more than 50 markets globally. It also says around 12% of China’s total foreign trade is settled in RMB and the bank expects this to rise to around 30% by 2015.

ANZ says it has had a continuous presence in China since 1986 and today ANZ China has branches in Beijing, Shanghai, Guangzhou, Chongqing and Hangzhou.

ANZ recently received preparatory approval on a Chengdu branch, where it already has an operations hub, and to establish a sub-branch in the China (Shanghai) Pilot Free Trade Zone (Shanghai FTZ). ANZ also has strategic partnerships with Shanghai Rural Commercial Bank and Bank of Tianjin.

Westpac says it has been present in China for more than 40 years and has foreign exchange dealers located in Shanghai. Its Asian branch network includes Beijing, Shanghai, Hong Kong, Singapore and Mumbai and a representative office in Jakarta.

More by Nevil Gibson

Comments and questions

Looks like the Australian & chinese banks are set to cash in on this deal.

This means that Chinese companies buying up our businesses, houses and land, can indeed take their profits off-shore?

Yes, just as they always could and just as NZ companies can bring their profits here and always could. Companies don't bother making profits they can't get at.

Obviously a good move that will assist trade between our two countries.

This will make it easier and cheaper for the Chinese to invest in N Z houses. I cannot see what good it is for NZ if most of the investment money goes into non productive areas like rental housing but does not produce any jobs for NZers.

NZ should wake up and bring in restrictions before it is too late!
National will not do this as they want houses prices to continue to go up.
It is called self interest as most politicians have investment properties.

Your xenophobia and/or lack of understanding of China based investment in NZ is appalling. This change will have no impact on the ability of China based people to invest in NZ houses, or any other form of investment in NZ. Most of the China based investment in NZ does not go into houses. It goes into businesses exporting to China, and grows these to provide more jobs for New Zealanders. The change will, however, save money for NZ exporters selling into China. Your crack at National does not justify a reply. It is rubbish.

Obviously ,Lindsay, you have not visited any house auctions in Auckland recently.
Nearly all the bidders are Asian - Chinese and are out bidding everybody else with their big bank accounts. I know, I have been to many of them in the process of buying a house.
Maybe they are bringing their money down here and putting it into real estate to hide it from the Chinese authorities

I definitely do not thing Anon is at all xenophobia..

They still can invest in housing market one way or the other if they really want to. The move however will make both parties a lots of money and cut your national debts since countries need to go in debts to purchase dollars for trading.